Brian Zinchuk is editor and owner of Pipeline Online
Prime Minister Justin Trudeau speaking at COP26 in Glasgow. Screen capture courtesy COP26
During the opening day the United Nations Climate Change Conference UK 2021 in Glasgow, Scotland, Prime Minister Justin Trudeau promised to “cap oil and gas sector emissions today, and ensure they decrease tomorrow, at a pace and scale needed to reach net zero by 2050.”
On Nov. 3, Pipeline Online spoke to Saskatchewan Minister of Energy and Resources Bronwyn Eyre about this province’s perspective on the federal government’s move to cap emissions from our second largest industry.
Pipeline Online: What does the federal government’s announced move to cap oil and gas emissions mean? Is it on production alone? Is it on consumption?
Bronwyn Eyre: Well, it’s unclear, and I think part of it is now making sense of the paradoxes here. And there is a lot of confusion over what it means. Certainly, we didn’t get any heads up about this happening, other than what everyone heard during the federal election; which was that this was a possibility, because it was it was mooted during the federal election. But no, no consultation with the provinces on this at all. I think, as we see, the paradoxes are, there are several. I mean, one is that Minister (Steven) Guilbeault, the environment minister, has said that the federal government can cap emissions, but not oil production.
But of course, if you cap emissions, you are capping production. So, you know, does it become the national energy policy by another means? We had hope, I mean, you always hope, that when these things are trialed ballooned, as this was, during the federal election, that maybe it won’t come to light. But we’re seeing another body blow here to the sector. Going to an international conference, and announcing domestic policy, surely isn’t the way to go.
Pipeline Online: Will this apply to imported oil and gas in Eastern Canada?
Eyre: You’d have to ask the federal government. And I don’t mean that in a glib way. I mean, I just they just haven’t gotten into that level of detail. And I would certainly assume, if I were a betting person, no. I think that that this is very much about the Western Canadian sector. And, I guess, Newfoundland, I don’t know if they consulted with them.
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But again, there are there are some facts I think that are quite relevant here. One is that since 2000, emissions from the oil and gas sector in Canada have been relatively flat, because production increases have been offset by a 36 per cent reduction in per-barrel emissions intensity. And so, if you’re going to cut 40 to 45 per cent, they’re saying 40 to 45 per cent, based on 2005, and we’ve got 36 per cent reduction since 2000, so really, for 21 years, are they taking that into account? We have no idea.
But I think, either way, how this is going to be monitored, measured, controlled, all absolutely TBD (to be determined). But also, of course, an unacceptable overreach into provincial jurisdiction.
Pipeline Online: Notably, the federal government did not announce a cap on emissions from the cement industry in Quebec. Why do you think that is?
Eyre: (It is) part of the long narrative of ‘Why do you think that is?’ in terms of other sectors, in other areas of the country for the last number of years, whether we’re talking about auto manufacturing, as you say, cement production. There are lots of ‘Why wouldn’t it apply to this area or that area?’ A lot of questions like that, which we’ve been saddled with for many years now.
Of course, it’s unfair. I think the way out of this, and the way we have to deal with it, and not ever become resigned to it. But weirdly enough, we are becoming almost used to these, these economic cripplers that we’ve seen over the past few years, in the cancellation pipelines, of course, Bill C-69, the carbon tax, it just goes on and on.
And if this does have teeth, obviously this is very, very serious.
Saskatchewan Minister of Energy and Resources Bronwyn Eyre. Handout
I think what we have to do is just keep telling the story about that 36 per cent reduction per barrel emissions intensity over the last 21 years, the story of the energy sector, how clean it is, how innovative it is, and trying to get a head of some of this pathways to zero talk. For example, on the SMR (small modular reactor) side, on the EOR-CO2 (enhanced oil recovery-carbon dioxide) side, if leading environmentalists, and I’ve heard them say, that the only way to Paris Accord, or let’s say now Paris Accord times two target, and net-zero, a target set by the federal government; the only way to get there is through enhanced oil recovery using CO2.
So, if they’re really serious about net-zero, then they’ve got to look seriously at EOR-CO2 and not exclude it under the federal tax credit. And I’ve said that to the minister, the new minister, just the other day, in trying to get that story out there again; 82 per cent fewer emissions on EOR-CO2 wells and SMRs. And again, the previous minister, (Seamus) O’Regan, said the pathway to net-zero is through nuclear. (Natural Resources Minister Jonathan) Wilkinson is not pro-nuclear. Guilbeault, we know, is not pro nuclear. So where that leaves everything, who knows? But if the previous Minister said it, and I assumed he was speaking on behalf of the government then, they’ve got to start to perhaps put some money toward their own pathways. And EOR-CO2 would be one, and SMRs would be another.
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Pipeline Online: Does this mean we will see more gas plants built to reduce venting and flaring, such as the Oil and Gas Processing Investment Incentive (OGPII) announcement yesterday? Or does it mean an end to any future development after this?
Eyre: No, we have to keep doing what we’re doing in Saskatchewan. We have to keep forging ahead, and that’s part of the methane discussion too, of course, and that was another thing featured at COP. And, in terms of the methane action plan that Saskatchewan put forward, part of that was through that oil and gas processing investment incentive. And that is for value added projects, such as such as we announced yesterday, and infrastructural projects, such as the North American Helium facility, where government money follows, it doesn’t lead. It’s basically in the methane space, to incentivize the conservation and commercialization of gas. And so, that’s a good thing. That makes common sense. In this case that reduces venting and flaring. I would be assuming and hoping that the federal government would be supportive of that because, in a province such as Saskatchewan, where you have to tie-in infrastructure, obviously there needs to be a little bit of assistance probably, in that regard. And that’s what the oil and gas processing investment incentive, does. It incentivizes companies to, in the methane area, conserve and tie in infrastructure, the to conserve the gas and tie-in infrastructure.
So that, I hope, would certainly continue, but it will, because they have no say in that. That is a provincial program, and it meets that goal that they’ve said they’re in favor of. And we have methane equivalency with the with the federal government, so let’s hope that that certainly isn’t under any threat. I can’t see why it possibly could be.
Pipeline Online: Does this mean for any new projects, efficiencies or shutdowns must be found with existing projects?
Eyre: TBD, because we have to see. They have no script or a game plan that they have released with this. Which is why one always wonders, is it just international conference virtue signaling?
Pipeline Online: The Government of Saskatchewan’s stated goal is to increase oil production to 600,000 barrels per day, roughly a one-third increase over today. How can we accomplish that with a cap on emissions?
Eyre: Well, again, let’s remember Minister Guilbeault: emissions is in their ambit, production is in ours. So, with that in mind, production is in ours, and still is; it is a provincial jurisdiction under the constitution, natural resources. And we have the right to act in that space, and we are, and we will, and we are doing that. You mentioned the OGPII, the oil and gas petroleum investment incentive – Moose Jaw refinery; decrease of GHGs, increase of production. The (Cenovus) announcement that we made a few months ago. Again, more egress, pipeline infrastructure, increased enhancement. That’s a provincial infrastructure incentive. Our books, our production, our infrastructure.
So that’s the whole riddle, of how we reconcile what the federal government, itself, is saying is their jurisdiction versus ours. And we saw that with the carbon tax, of course. But the carbon tax, is it was perhaps one thing, at least, we didn’t agree with that decision. But let’s say if you argue that emissions is in the federal ambit; okay, then, I guess that’s what the justices found in terms of finding, as they did, on the carbon tax. This is quite different, really, in terms of trying to figure out where an emissions cap, a strict emissions cap ends or begins, and production ends or begins. That’s the huge paradox.
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Pipeline Online: How can Cenovus keep building its cookie-cutter SAGD plants if the federal government could move in short order to cap emissions? What does that do for investment certainty, or uncertainty, in the industry?
Eyre: Well, again, that’s the that’s the massive question. I mean, (Cenovus) has its board. It has its capital allocation budget. And it has its growth projections, as we do in the province. A lot of these companies have, we know, the profile on emissions has been very, very impressive. And I referenced that emissions from the sector in Canada have been more or less flat for 21 years. That’s because of the innovations that the sector has put into place. And so, you’re capping emissions on a sector that has had flat emissions for 21 years. Can anyone make sense of that?
Pipeline Online: Do you think the Impact Assessments Act, aka the “No More Pipelines Act” will be used by the federal government as to say, “No more additional emissions, so you can’t build anything additional from now on. Capping emissions means no additional emissions, period?” Do you think this was an underlying reason for that act in the first place?
Eyre: I heard there were rumors that, during the federal election, that was partly where they were thinking of going, in terms of you know, no more oil sands development; no more, no more. And I don’t know if it was limited to oil sands. Obviously, it never came to light, in terms of no more development in the oil and gas space.
I think they’re casting about to try to fit their own agenda, In some ways, their self-proclaimed agenda. There are only so many ways of doing that. And then you start having to parse words about whether its emissions or production and one versus the other, and so on. I think that, obviously, we know Bill C-69 is a great killer, potentially, of projects. I mean, ironically, of course, TMX (TransMountain Expansion) is, to this point, still going ahead. We’ll see what happens with that. And where, really, the Environmental Impact Assessment Act, goes, in terms of clear examples of something before the Act, would it go ahead, but for the Act? As in, would a project go ahead, and the Act, as in the Bill C 69 Act, kills it? It hasn’t been that explicit, yet. But we’ll have to see.
But all of this is bad. I mean, all of this is noxious and anti-energy. Taken together, it really has just been one body blow after another. And so, taken together, will we see a lot of projects, certainly internally, I mean, you’ve raised Energy East, and so on, ever going ahead, where there’s a cross border element to them? I can’t see it under this federal government.
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